4 Types of ICO Tokens to Know About
Since the inception of Bitcoin, Blockchain technology has become web 3.0 of internet realm. Blockchain technology has brought forward many useful programs such as cryptocurrency development, ICO (Initial Coin Offering) Development, wallet development, and smart contract development. Out of this ICO development was popularized during the year 2017 due to speculation of providing high returns with investment in ICO tokens. Indeed, the individual made huge profits but many were misfortunate or unknowledgeable about ICO process. Basically, ICO stands for Initial Coin Offering. In ICO, a technopreneur develops new cryptocurrency offering some of it as an ICO token to the investor in return of widely known cryptocurrencies such as Bitcoin or LiteCoin. During the introduction of ICO token, it became a tool for fundraising for aspiring entrepreneurs. Now the Blockchain market situations have changed to pace with demand and these tokens are evolved in various types. The types of ICO tokens based on its use are as follows:
1. Utility Tokens Utility tokens are cryptocurrencies which able the holder to use a particular product, service or a platform. These are very common in the Blockchain market. To make it simpler, it is the digital currency to purchase a product or use an Internet-based service provided by Developer Company of that cryptocurrency. Utility tokens are mostly known as app coin. These are distributed through ICO project launching. By this, the company aims to raise crowd-funds and users aim at acquiring of product or service provided by the company. The supplies of utility tokens are controlled by the developer or the company responsible so the demand of token may increase provided that demand for underlying product or service. Since total supply is fixed, utility tokens may appreciate over time if demand for the product or service increases.
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2. Equity Tokens Equity tokens are very similar in nature with an IPO. It provides ownership to underlying platform, product or service developed by the company or an entrepreneur. Equity tokens are as well distributed through ICO launch but to a specific group of investors. These investors provide ample funds to startups or to grow business. In return, pieces of rights to ownership are provided. Through equity tokens, token holders are able to participate in organizational decision making but unlike traditional IPOs where manipulation in voting is possible, by using Blockchain development voting is untainted. Due to these advantages, it is very likely that equity tokens are on embark to create Blockchain financial market replacing traditional methods to raise funds. 3. Asset Tokens The third type of classification is asset token. This less popular token is backed by a physical asset such as Gold or a property. The fractional value of the token is based on the value of a physical asset’s price. Hence, the token is having similar prices as the physical asset. Also, similar prices of asset tokens are a reason for being less known and used. In the United States, these token are subject to SEC securities regulations. It involves the criteria to classify a token into a security or an investment.
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4. Reputation/Reward Tokens The reputation or reward tokens are given a mark of trust on that individual. Its purpose is to give recognition to that individual for work he did in a particular Blockchain. These tokens are usually not tradable in nature and liquidity is unlike other types of ICO tokens. The reason being identifying the right value of reward tokens are hard to maintain. To be clearer, reward tokens can be compared to awards given for a profession like literature where the value of the award holder is considered immense. To understand ICO tokens better and easier, one can apply methods of traditional investment tools as the primary features of an investment do not change. Laws of demand and supply are applicable to all mentioned tokens, hence choosing wisely when putting forth your money for investment would be a great choice.
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